August 13: As the yuan hit a four-year low following the Chinese central bank’s decision to devalue its currency on Tuesday, observers say the devaluation will affect Nepal as well.

The yuan traded in China hit 6.4510 per US. dollar, its lowest since August 2011. The currency fared even worse in the international market, touching 6.59 to the dollar.

What does this mean for the average consumer in Nepal?
When a currency weakens in the international market, exports from that particular country (in this case China) become cheaper. So when Nepali importers buy goods in China, they need to pay less (owing to the lowered exchange rate). 

However, Nepali consumers will have to wait till Dashain for the new prices to come into effect as the Tatopani customs, closed after the April earthquake, will resume operations only before the festival season.

Nepal imports huge quantities of readymade garments, shoes, electronic items and fruits from China through Tatopani in Sindhupalchowk and Rasuwagadhi in Rasuwa. “After the devaluation of the Chinese currency, demand for Chinese hardware, tiles and air conditioners may increase,” says Kamalesh Kumar Agrawal, General Secretary of Nepal Chamber of Commerce. 

He says that due to the devaluation, importers will feel a sense of relief, and ultimately consumers will also have to pay less.

Meanwhile, Chinese authorities are yet to allow Nepali businessmen to move containers stranded in Khasa following the quake. Traders say around 500 such containers are still stranded in China, even as obstructions on highway caused by the earthquake have been cleared. That is why Nepali consumers will not feel the effect of the devaluation soon, they say.